One American Automaker Poised To Benefit From UAW Strikes

The United Auto Workers (UAW) strike against the big three automakers continues unabated, with thousands of workers protesting for higher wages. Even with 13,000 workers on strike, General Motors, Ford, and Stellantis refuse to submit to union demands despite support from highly influential figures. But it seems one American automaker is benefiting from this, with analysts saying Tesla will gain an advantage from the ongoing strike, reports Automotive News.

In our view, Tesla's the biggest winner," said CFRA's Vice President of Equity Research, Garrett Nelson. "Already, their labor costs were an estimated 35% - 40% lower than the Detroit Three, and that cost advantage will be widening when a deal is eventually reached," he told BNN Bloomberg.

The automakers are currently offering a 21% wage increase, but Nelson says the union is asking for an overall increase of around 36%. This will make it more expensive for the big American automakers to transition to electric vehicles.

Tesla already has a stronghold on the American electric vehicle market, with a 60% market share for the first three quarters of the year, reports Kelly Blue Book.

"This strike, in our view, is really going to hamper the Detroit Three's ability to compete in the EV market, just with the much higher labor costs," added Nelson. With this in mind, CFRA estimates Tesla's stock will have a 12-month price target of $325 per share. At the time of writing, Tesla's price is $241.94 per share.

Let's not forget that Tesla has cut the pricing of its electric vehicles, making them even more appealing to customers. A new Model 3, for example, can be had for as little as $33,000 after incentives. That's a remarkable price and very difficult to compete with if you're a legacy automaker.

Tesla CEO Elon Musk has already said he is willing to sacrifice profits to achieve a 50% sales growth target.

Gene Munster, a managing partner at Deepwater Asset Management, believes that once unions and the Big Three reach an agreement, Tesla's labor costs will be 48% lower than its American rivals. Tesla's average labor cost is pegged at around $55 an hour, while UAW worker costs could rise to $105 per hour when you include things like profit-sharing and pension plans.

Cox Automotive's Stephanie Valdez-Streaty told Automotive News, "Even though Tesla is expected to give up some percentage points in share, there's little doubt Tesla remains a major force in today's EV market." Not including the models currently on sale, the Detroit-based manufacturers have a slew of new electric vehicles on the horizon.

This includes high-end vehicles like the new Cadillac Celestiq and more affordable models like the upcoming second-generation Bolt.

Democratic Congresswoman Alexandria Ocasio-Cortez said she has plans to swap her Tesla Model 3 for a union-made EV in solidarity with UAW workers. The Congresswoman told Face The Nation that she purchased the car during the pandemic because she needed something with a strong driving range.

"That was prior to some of the new models coming out on the market that had the range available. But we're actually looking into trading our car now. So we're looking into it, and hopefully, we will soon," she said.

Tesla's workers are not unionized, but there have been attempts from employees to launch a unionization project. Nothing has come of this, as the workers involved were dismissed shortly after announcing their intentions to form a union. The automaker denies this has anything to do with the union attempts, but the company has been accused of using union-busting attempts in the past.